Budget 2026 expectations: Why India must put prevention at the centre of healthcare reform

By Srikanth KandikondaAs India prepares for the Union Budget 2026-27, stakeholders across sectors are sharpening their focus on measures that can strengthen economic resilience and citizen welfare in the coming year.

In the healthcare and insurance space, expectations are anchored in a sustained commitment to making quality healthcare accessible and affordable for all. With rising medical inflation and evolving health risks, the budget presents a timely opportunity to bolster public health infrastructure and support insurance solutions that protect millions of Indian families.We recognize and applaud the proactive policy measures the government has already taken to support the health insurance sector and make coverage more affordable.

A major development has been the passing of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, which allows 100% foreign direct investment (FDI) in the insurance sector. This year, the government has also taken steps to reduce the cost burden on policyholders by removing 18% GST earlier levied on insurance premiums.

This initiative makes health and life insurance products more affordable for customers, especially for underserved communities.

Medical Inflation: The primary challengeMedical inflation is the most pressing concern at the moment. As per industry reports, it is projected around 11.5-14% for 2025-2026, significantly outpacing general inflation, and among Asia's highest. Customers unfortunately bear the brunt of it. With hospital bills, cutting-edge treatments, specialized medicines, and a heavier load of illnesses are all driving up out-of-pocket expenses, leaving too many without the care they need.Given this backdrop, we request the government to take steps in the Union Budget to increase public healthcare spending. Currently, public health expenditure in India remains below global benchmarks and even short of the National Health Policy target of 2.5% of GDP in 2025. Enhancing the budgetary outlay for public health would strengthen primary care networks, expand preventive services, and relieve financial stress on citizens.

It would also support the expansion of community health infrastructure in underserved areas which are critical in bridging healthcare inequities.Prevention is the need of the hour While increased public spending is imperative, complementary policy measures can significantly accelerate the transition toward preventive healthcare, a proven strategy for reducing overall healthcare expenditure. Evidence from India and globally demonstrates that prevention fundamentally alters the economics of healthcare.

For instance, primary prevention programs in cardiovascular disease management alone saved 3.6 million disability-adjusted life-years (DALYs) annually at an incremental cost-effectiveness ratio of $469 per DALY averted when compared with the status quo of no coverage.

The impact on hospitalization is equally significant. Individuals with Outpatient Department (OPD) coverage, demonstrate 5-10% reduction in hospitalizations compared to those without such coverage.

In practical terms, this means preventing the need for expensive hospital visits and prolonged inpatient stays. To harness this prevention dividend and encourage wider adoption of OPD coverage, we recommend the government introduce separate and enhanced tax benefits specifically for OPD services and preventive health screenings in the Union Budget 2026-27. Currently, preventive health check-ups receive a modest tax deduction of ₹5,000 annually under Section 80D.

This is a limit that does not reflect the true value of prevention in reducing long-term healthcare costs.According to a recent report by KPMG, by 2050, India is projected to account for 16% of the global population aged 60 and older. As per United Nations Population Fund, India’s elderly population is predicted to double by 2050 and overtake the number of children in the country. As people live longer, the risk of chronic illnesses also increases.

This makes preventive healthcare even more critical. Regular health check-ups, early detection and timely care can help seniors stay healthier for longer and avoid serious medical complications later.

Policy measures that support preventive healthcare are, therefore, the need of the hour. Looking forward, the Union Budget 2026-27 provides a strategic moment to reinforce a health-led growth framework that aligns with India’s long-term vision of ‘Insurance for All by 2047’.

The combination of increased public investment, and pro-insurance reforms, and focus on preventive approach, can accelerate progress towards universal health protection and financial security for all Indians. As the budget announcement approaches, we look forward to constructive reforms that foster greater affordability, inclusivity, and resilience in India’s healthcare and insurance landscape.(Srikanth Kandikonda is Chief Financial Officer of ManipalCigna Health Insurance)